Why 3M is unique

September 26, 2010

What kind of company is 3M? Yes, I know that 3M is a 108-year-old manufacturing company, based in St. Paul, Minnesota, which brought in $23 billion in revenues last year from a range of products including abrasives, adhesives and, famously, Post-it notes. Remarkably, 3M makes 55,000 different products.

But what’s the core business of the company? What is its unique advantage? What is its purpose?

When I visited 3M last month to prepare a story for FORTUNE, George Buckley, the CEO, waxed enthusiastic about the firm, as you would expect a chief executive to do. “There is no company like it in America,” he told me. “There is no company like it in the world.”

That sounds like hype, but I think he’s right. 3M is not a conglomerate like GE or United Technologies, which own a variety of industrial businesses that operate, for the most part, on their own. Nor, like Apple or Sony, is it a technology company that focuses on a single industry or two, i.e., consumer electronics and entertainment. Instead, 3M — a supplier to all of those companies– is a set of businesses organized around a big, busy and intellectually productive R&D lab which researches new technologies and processes and then develops them into products. The company’s purpose, as best as I can tell, is to invent useful new things. Its unique competitive advantage is a culture that fosters innovation.

3M is everywhere. That’s the point George Buckley, the chairman and CEO of 3M, is trying to make as he talks about his favorite subject, inventing things. Last year, he says, “even in the worst economic times in memory, we released over 1,000 new products.”

As if on cue, Buckley’s new iPhone rings, showing a photo of his daughter. “Daddy’s in a meeting,” he says, and hangs up.

“I’m told there’s some 3M inside that phone,” I say. Buckley replies, “There’s lots of 3M inside.” He can’t say exactly what 3M (MMM, Fortune 500) gadget is in the iPhone; Apple’s skittish about such things. But point well made: 3M is everywhere.

Apple–and many other companies–couldn’t do what they do without 3M. The St. Paul company produces a mind-bending 55,000 products. Some of them you know — Post-it notes, Scotch tape, Dobie scouring pads, Ace bandages, Thinsulate insulation. But most you don’t, because they’re embedded in other products and places: autos, factories, hospitals, homes, and offices. Scientific Anglers fly-fishing rods? Nutri-Dog chews? They also come from 3M.

The story goes on to argue that 3M’s ability to innovate slipped some under its prior CEO, Jim McNerney, who came from GE and went on to Boeing. McNerney is, by all accounts, a great leader and he brought needed discipline and cost controls to 3M. But Buckley, an British-born engineer, better grasped the 3M culture and its importance, and the company has become more inventive since he was hired at the end of 2005.

George Buckley (3M photo)

Buckley is a charming and, above all, enthusiastic guy. I didn’t have room in the FORTUNE story to say much about him, but he the kind of person who, in his spare time, likes taking apart and putting together old motorcycles or restoring Victorian furniture. He’s also a serious scientist, with several papers and patents in electrical engineering to his name. While he surely needs traditional management skills to oversee a global company of 75,000 people, my sense is that his scientific curiosity about how the world works and boyish delight in how things get invented make him a perfect fit for 3M.

“This is, to me, an engineer and scientists’ Toys ‘R Us,” he told me.

3M has been blessed over the years with a number of creative and thoughtful CEOs. Long before Google, 3M gave engineers time off to work on projects of their own choosing. In another unusual practice, 3M awards annual Genesis Grants, worth as much as $100,000, to company scientists for research; the fund are allocated by their peers. The company also finds ways both virtually and face-to-face to connect people horizontally (across different businesses) as well as inside vertical silos so they can share ideas. That’s how Post-It notes were invented, a classic 3M story.

3M was also an early adopter of the idea that the best ideas come from people who are given autonomy and encouraged to master whatever it is they do. This was articulated beautifully by William M. McKnight, who was 3M’s chairman from 1949 to 1966, the era of The Organization Man, and yet understood the value of pushing authority and responsibility down into the organization.

Back in 1948, he wrote:

As our business grows, it becomes increasingly necessary to delegate responsibility and to encourage men and women to exercise their initiative. This requires considerable tolerance. Those men and women, to whom we delegate authority and responsibility, if they are good people, are going to want to do their jobs in their own way.

Mistakes will be made. But if a person is essentially right, the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it undertakes to tell those in authority exactly how they must do their jobs.

Management that is destructively critical when mistakes are made kills initiative. And it’s essential that we have many people with initiative if we are to continue to grow.

This is a CEO who was well ahead of his time. McKnight is still revered at 3M. No wonder the company has done so well.